only macy's, t.j. maxx and ross stores boosted their earnings guidance. so the concern is the strong sales may have been rooted in deep discounting, which hurts profits. but analyst brian sozzi believes margins at most stores are improving, thanks, in part, to falling prices for cotton and gas. >> i think what might be setting up-- it's not priced into the stocks yet, but what i call a retail earnings bonanza, where you are seeing the consumer continue to go along slowly, sluggishly, but costs starting to come down. >> reporter: as a result, sozzi expects retail stocks to continue to power higher. his two favorites are nordstrom and wet seal. >> nordstrom-- i like the valuation there. i think they are gaining share even from a saks. the valuation on saks doesn't excite me. on wet seal, their merchandise is very correct. some of the key competitors to wet seal, such as american eagle or aeropostale, their merchandise is not correct. >> reporter: june is typically the second biggest shopping month of the year. but some analysts think july will be a more important barometer of consumer spending. not only is it the start of the back-to-school season, there's also less discounting.